I spend most of my time digging into Wall Street, hedge funds and private equity firms, looking for both the good and the bad. I also focus on the intersection of business and the law. I have worked at Forbes since 2000.

The Man Responsible For Facebook's Stock Debacle Is Mark Zuckerberg

Mark Zuckerberg, founder and CEO, shows off the new messaging system in Facebook. (Photo credit: Wikipedia)

When the stock of a company plummets, wiping out $50 billion in market value in 90 days, there can only be one person ultimately responsible. While it takes a village of corporate officers, investment bankers and a stock exchange to achieve this kind of feat, it’s the chief executive of the company who should shoulder the blame.

Fingers have pointed during the summer at Morgan Stanley and Nasdaq. On Tuesday, Andrew Ross Sorkin, the influential CNBC anchor and New York Times editor, wrote that “it’s David Ebersman’s fault. There is just no way around it.” Sorkin figures that “if there is one single individual more responsible” it’s Ebersman, Facebook’s chief financial officer, since he “almost alone” pushed to increase the size of the offering and agreed to increase Facebook’s IPO price to $38. Sorkin does a good job detailing Ebersman’s mistakes and miscalculations, and finds it remarkable that nobody has been fired for the botched offering.

But it’s impossible to fire the man responsible for the Facebook fiasco because he has structured Facebook’s equity ownership in a way that essentially makes him CEO-for-life. It’s not just that Zuckerberg is the CEO and the buck stops with him. He purposely and deliberately created a culture at Facebook that was dismissive of the stock market and the responsibilities of being a publicly-traded company.

Zuckerberg has always separated Facebook’s capital structure from its business, saying he wanted the focus of the company to be its product. Zuckerberg’s attitude was made clear when he showed up at the company’s road show wearing a hoodie. There is no doubt who is in charge here, as Facebook’s dual-class share structure gives Zuckerberg complete control of the company. He thought he could go on without worrying too much about the stock price. During a recent company meeting at which Zuckerberg addressed Facebook’s plunging stock price, theWall Street Journal reported that one employee asked if employees are now allowed to talk about the stock price. Zuckerberg said it would be allowed for employees to talk about the stock price, but not to focus on it too much.

If Ebersman is the most responsible person for Facebook’s stock fiasco, it’s only because at Facebook it is okay to recuse yourself from something as important as an initial public offering. Sheryl Sandberg, Facebook’s chief operating officer and so-called adult in the room, did not participate in picking underwriters for the IPO because of a personal relationship she had with Michael Grimes, Morgan Stanley’s co-head of global technology banking, who seems to know everyone in Silicon Valley. Sandberg also recently said it was part of the culture at Facebook to immediately allow its venture capital backers to trade out of the stock, according to a report by Fox Business Reporter Charlie Gasparino, who suggested the company favored connected Silicon Valley investors over stock market investors.

Zuckerberg might be getting a pass because he is a techie and only 28 years old. But he is not the chief product officer of Facebook. He is the chief executive officer of Facebook. He tried to avoid the stock market and played games with venture capitalists and Russian oligarchs. The result was that he had to navigate the incredible company he built through an impossibly complex IPO. He was not up to this management task and that has caused real problems for his company, starting with the fact that it will be tougher for him to attract and retain talent while competing with the likes of Google. Now, it will be up to Zuckerberg to learn these hard lessons and lead his company out of this mess.

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Who cares, they raised a chunk of change. Had they priced at 10 and jumped to 17, everyone would be bitching about the money they left on the table. It ridiculous, there is no crtystal ball; as we all know, only an auction solves the guessing game.

What I don’t understand about the ARS column is the motivation. This is not really about assigning blame. Anyone who bought Facebook shares – public or private – would/should know that young tech companies are highly volatile. On the back of Facebook, private company “social networking” companies were afforded monstrous valuations. For arguments sake, let’s say the company raised money at a short-term valuation peak. It’s everyone’s fault and no one’s fault. Next!

Facebook’s stock is a debacle only if you were a buyer at inflated prices. If you were an insider like Zuckerberg or Thiel, you made out like a bandit.

Facebook will go to $7/share by year end, representing 10B in cash and $15 in enterprise value. Which values them at 15X earnings. Problem is that their earnings are falling as users shift to mobile and expense rocket from overhiring and overspending. So by the end of next year, I expect the stock will be about $4.

Why should Mark Zuckerberg be held responsible for stock debacle? Were not underwriters supposed to be doing due diligence? And what about auditors and financial advisers? Facebook debacle once again demonstrates that too much of financial engineering is now actually destroying our faith in financial system. It is time to step back and bring this system under control.

I don’t thin you can blame Mr marc Zuckerberg. All the reasons showed here where aso know before, it shows more the inconpitence of the banks preparing the IPO. What was in their mind, the big $$$ signs… The were blinded by the success they dreamed off, and the presented it to their clients.

How many times should Warren Buffet repeat, understand the company you invest in???? How many times we have to see people investing in the name, glamour,media instead of doing their home work?

I think Facebook is getting a better value, a more correct value today, don’t forget this is still a $50 billion worth company! Congrats Mr Zuckerberg, I wish my companies could reach this value as well.

To all the investors who lost, I hope the rteaching wasn’t to expensive, but next time thnik twice before you believe you r bank and do some research.

” I don’t thin you can blame Mr marc Zuckerberg. All the reasons showed here where aso know before, it shows more the inconpitence of the banks preparing the IPO. What was in their mind, the big $$$ signs… The were blinded by the success they dreamed off, and the presented it to their clients.

How many times should Warren Buffet repeat, understand the company you invest in???? How many times we have to see people investing in the name, glamour,media instead of doing their home work?

I think Facebook is getting a better value, a more correct value today, don’t forget this is still a $50 billion worth company! Congrats Mr Zuckerberg, I wish my companies could reach this value as well.

To all the investors who lost, I hope the rteaching wasn’t to expensive, but next time thnik twice before you believe you r bank and do some research. ” frederikvanlierde

” I think Facebook is getting a better value, a more correct value today, don’t forget this is still a $50 billion worth company! Congrats Mr Zuckerberg, I wish my companies could reach this value as well. “ ,. The end game for Facebook is its collapse as a commercial for profit company late February early March 2013 at share price of around eighty US cents.

Anyone know whatever happened to ole greedy Nobel Peace prize wannabe Bono in his ambition of becoming “the world’s richest rock star”? I’m guessing that boat went sailing some months ago… but really, did he sell?, if so, how much were his losses?… and if he’s still in, why is he?

Lots of Obama Syndrome going on here. Zuckerberg is a genius when it goes right and blameless when it doesn’t. The guy loved taking money from investors and he got so many of them he had to play a new game with new rules and expectations. Sorry if reality is difficult for he or his followers but it is their problem and it is self-inficted. This guy shits like the rest of us but many are STILL too blind to accept that he is human. People buying this stock deserve what they get.

I think it reasonable to have suspicions that Facebook was not being run as a long term business and the objective was simply to dump shares on mugs at something like thirty to forty times their legitimate value, take the money and run.

Over the long term (typically less than 3 years 95% of the time and 18 months 80% of the time – more or less) most stocks trade around a reasonable expectation of their future discounted cash flows.

FB is and will be no different.” afamiii

People who bought Facebook shares at a 38 to 18 dollars price point are going to lose their shirts if they do not dump their shares. Facebook will hit around an 80 cents price point by late February early March 2013 and Facebook will collapse as a commercial for profit company shortly after that.

Totally agree, Nathan. Zuck never wanted to be a public company, but he let it happen. Now he must bear the responsibility.

In a larger sense, I’m happy FB blew up because that took the air out of the social media bubble. Groupon and Zynga signaled the sector’s overvaluation, but it took mighty FB to pop the balloon. As a consequence, VC money is going into more interesting things than just social media. That’s good for innovation.

Is the writer implying that google+ will challenge facebook now b/c of falling stock prices? Seems absurd. Wall Street and the powers that be control what is said and done. Facebook stock prices rise and fall as they deem. Zukerberg knows this. We all know this. Seems only as if Nathan Vardi is the only one who doesn’t know it…

I don’t understand the outrage over the Facebook stock price situation.

It seems to me that none of the investors read the prospectus.

In the prospectus, Zuckerberg made it clear that he wouldn’t manage to create share price appreciation, wouldn’t manage to deliver consistent returns, and that profitability itself was secondary to his core social mission.

He also made it clear that he set up a structure that gave him total majority voting authority to run the business the way he wanted to, regardless of what other shareholders wanted.

Finally, he pointed out that he didn’t care if you didn’t like it.

Investors either didn’t read the prospectus where he very clearly laid all of this out, or they did and didn’t believe it. Now they’re complaining about the price decline?!?

Gimme a break.

Next time, read the prospectus. Know what you’re buying before you buy it.

“The man responsible…”???? Surely you jest! First, there was no debacle — at least from Facebook’s point of view. It appears as though they sold every share at pretty much the price they wanted.

Now the bagholders’ debacle afterwards, well, that’s different. There you can fix the blame directly on Wall Street and its thundering herd of greedy brokers who suddenly came face to face with the grim reality that there really weren’t enough retail suckers to buy their inventory.

Have you ever watched Morning Joe on MSNBC? There is a guy named Harold Ford on there that evidently is not very proud of working for Morgan Stanley. Maybe Ford is ashamed of riding the revolving door from Capitol Hill to Wall Street.

Harold Ford is always introduced as some kind of “visiting” professor or lecturer at some Manhattan college, when in fact he works for Morgan Stanley. Ford was able to secure that position via the revolving door from Capitol Hill to Wall Street.

Anyway, Ford has been touting Facebook from his seat on the Morning Joe panel. I believe that most people watching Morning Joe know that Harold Ford works at Morgan Stanley, but instead of being introduced as a “visiting professor,” Ford should be introduced as an employee of Morgan Stanley, an underwriter for the Facebook IPO.

i hate facebook but i would buy some stock now, come on, its the world’s second most visited website, how low can it go. then again im chinese, and stereotypically opportunistic, (dare i say it) , like a jew